Goldman Sach (GS) is a multinational investment banking firm, that engages in global investment banking, securities, investment management and other financial services to primarily institutional clients. Founded in 1820, it has over time grown to become the largest investment banking firm in the world. Many top executive of the firm have worked in and around the federal government, which has made the firm the most influential Wall Street institution in Washington, D.C.

Company History

Founded in 1820 by Marcus Goldman, and the firm made its name at the time by pioeering the use of commercial paper for entrepreneurs and joined the New York Stock Exchange in 1896. The firm's capital grew rapidly and it continued to expand its business. Goldman during the Great Depression turned away from trading and toward investment banking. It was Sideny Weinberg action that restored Goldman's tarnished reputation, and he was the mover of the IPO of Ford Motors in 1956. During this time the firm became a early innovator in risk arbitrage. It continued throughout the late 1950s through the 1980s to grow and expand its business. In 1990 the firm went public, which made the top partners in the firm multimillionaries over night.

Financial Crisis

During the financial crisis Goldman was able to secure over $4 billion in profits from shorting subprime mortgages, which allowed it initially to avoid large subprime writedowns, and achieve net profits, while most of its peers where reporting heavy losses that put most of them near collapse. In September 2008, Bershire Hathaway agreed to purchase $5 billion in Goldman preferred shares, with warrents to buy another $5 billion in common stock which were execisable for a five-year term. The firm also received $10 billion preferred stock investment from the US Treasury in October 2008, as part of the Trouble Asset Relief Program.

Goldman Borrowed a Total of $782 billion in hundreds of transcation in three months.

In 2009, the firm repayed the Treasury's investment with 23% interest in the form of $318 million in preferred dividend payments and $1.4 billion in warrant redemptions. On March 18, 2011, the firm got approval to buy back its preferred stock from Berkshire Hathaway by the Federal Reserve.

Business Operations:

Investment Bank - Accounts for 17% of total revenues

Trading and Principal Investment - Accounts for 68% of revenues and profits

Destress-Debt Investment - Invest in Destress Debt Globally

Asset Management and Securities Services - Total Assets Under Supervision of $21 billion

GS Capital Assets - Invested over $17 billion over 20 years

Major Private Equity Assets:

The Ayco Company LP

Hawker Beechcraft

Cogentrix Energy

American Casino & Entertainment Properties

CHI James Restaurant Holdings

USI Holdings Corporation

East Coast Power LLC

Queens Moat Houses

Shineway Industrial Group

Equity Inns. Inc

Arcander

Medfinders Inc

Latin Force Group Inc

Archon Hospitality Japan

CMC Markets

Finances

Balance Sheet

2013

31/12

2012

31/12

2011

31/12

2010

31/12

Total Current Assets

-

-

-

-

Cash and Short Term Investments

-

72669

56008

39788

Cash

-

6750

7950

5750

Cash & Equivalents

-

65919

48058

34038

Short Term Investments

-

-

-

-

Total Receivables, Net

-

91354

74465

78140

Accounts Receivables - Trade, Net

-

91354

74465

78140

Total Inventory

-

-

-

-

Prepaid Expenses

-

-

-

-

Other Current Assets, Total

-

-

-

-

Total Assets

-

938555

923225

911332

Property/Plant/Equipment, Total - Net

-

8217

8697

11106

Property/Plant/Equipment, Total - Gross

-

17267

17157

18976

Accumulated Depreciation, Total

-

-9050

-8460

-7870

Goodwill, Net

-

3702

3802

3495

Intangibles, Net

-

1397

1666

2027

Long Term Investments

-

685691

706000

713059

Note Receivable - Long Term

-

20234

3306

3747

Other Long Term Assets, Total

-

55291

69281

59970

Other Assets, Total

-

-

-

-

Total Current Liabilities

-

-

-

-

Accounts Payable

-

194485

198292

190504

Payable/Accrued

-

18991

4108

4650

Accrued Expenses

-

8292

5701

9089

Notes Payable/Short Term Debt

-

218717

215369

218496

Current Port. of LT Debt/Capital Leases

-

48389

58021

49925

Other Current liabilities, Total

-

72848

46642

40611

Total Liabilities

-

862839

852846

833976

Total Long Term Debt

-

176270

181724

188247

Long Term Debt

-

176270

181724

188247

Capital Lease Obligations

-

-

-

-

Total Debt

-

443376

455114

456668

Deferred Income Tax

-

-

-

-

Minority Interest

-

508

1450

872

Other Liabilities, Total

-

124339

141539

131582

Total Equity

-

75716

70379

77356

Redeemable Preferred Stock, Total

-

-

-

-

Preferred Stock - Non Redeemable, Net

-

6200

3100

6957

Common Stock, Total

-

8

8

8

Additional Paid-In Capital

-

48030

45553

42103

Retained Earnings (Accumulated Deficit)

-

65223

58834

57163

Treasury Stock - Common

-

-46850

-42281

-36295

ESOP Debt Guarantee

-

-

-

-

Unrealized Gain (Loss)

-

327

83

113

Other Equity, Total

-

2778

5082

7307

Total Liabilities & Shareholders' Equity

-

938555

923225

911332

Total Common Shares Outstanding

-

465.15

485.47

507.53

Total Preferred Shares Outstanding

-

0.18

0.12

0.17

Income Statements

2013

31/12

2012

31/12

2011

31/12

2010

31/12

Total Revenue

40874

41664

36793

45967

Revenue

40874

41664

36793

45967

Other Revenue, Total

-

-

-

-

Cost of Revenue, Total

6668

7501

7982

6806

Gross Profit

34206

34163

28811

39161

Total Operating Expenses

29137

30457

30624

33075

Selling/General/Admin. Expenses, Total

14923

15188

14871

17892

Research & Development

-

-

-

-

Depreciation / Amortization

1322

1335

1439

1915

Interest Expense (Income) - Net Operating

-

-

-

-

Unusual Expense (Income)

-

410

440

466

Other Operating Expenses, Total

6224

6023

5892

5996

Operating Income

11737

11207

6169

12892

Interest Income (Expense), Net Non-Operating

-

-

-

-

Gain (Loss) on Sale of Assets

-

-

-

-

Other, Net

-

-

-

-

Net Income Before Taxes

11737

11207

6169

12892

Provision for Income Taxes

3697

3732

1727

4538

Net Income After Taxes

8040

7475

4442

8354

Minority Interest

-

-

-

-

Equity In Affiliates

-

-

-

-

U.S GAAP Adjustment

-

-

-

-

Net Income Before Extraordinary Items

8040

7475

4442

8354

Total Extraordinary Items

-

-

-

-

Net Income

8040

7475

4442

8354

Total Adjustments to Net Income

-314

-183

-1932

-641

Income Available to Common Excluding Extraordinary Items

7726

7292

2510

7713

Dilution Adjustment

-

-

-

-

Diluted Net Income

7726

7292

2510

7713

Diluted Weighted Average Shares

499.6

516.1

556.9

585.3

Diluted EPS Excluding Extraordinary Items

15.46

14.13

4.51

13.18

DPS - Common Stock Primary Issue

2.05

1.77

1.4

1.4

Diluted Normalized EPS

16.78

14.01

5.08

15.22

The firm produced net revenues of $34.2 billion and net earnings of $8 billion, an 8% increase from $7.5 billion in net earnings from 2012. Diluted earnings per share were $15.46 compared to $14.13 for 2012. Revenues that reflect the Client Services segment decreased 13% to $15 billion, and U.S. segment deceased 1% to $19 billion. It leverage ratio has fallen by more than one-half from 26 times at the end of 2007 to less than 12 times in 2013.

Goldman's excess liquidity as a percentage as a percentage of total assets grew from 5% at the end of 2007 to more than 20% at the end of 2013. Shareholder equity has grown from nearly $43 billion in 2008, to $78 billion at the end of 2013, which is a 83% increase the last six years. Capital ratios continued to improve despite returning $7.2 billion to shareholders through dividends and share buybacks.

Financial Assets and Liquidity

Ratio's

2013

2012

2011

Return on Assets

0.84%

0.78%

0.27%

Return on Equity

11.00%

10.70%

3.7%

Debt to Equity

2.26

2.41

2.58

Leverage Ratio

11.6x

12.4x

13/1x

Tier 1 Common

14.6%

14.5%

12.1%

Tier 1 Capital

16.7%

16.7%

13.8%

Valuation

Goldman Sach currently sells for 10x its earnings, 9.4x forward earnings, 6.1x its pretax earnings, 1x its book value, and sells for over 20x its free cash flow. Goldman isn't screaming undervalued but it is selling below its fair value. The firm should trade at more than 10x its earnings, which makes Goldman one of the cheapest large financial firms in the market today. Morgan Stanley, one of Goldman's peers, sells for 20x its earnings which is a highly unrealistic multiple for Goldman to trade to. Goldman to should trade for between 12x to 15x its earnings. If Goldman sold at 12x its normalized earnings then it would sell for $185.64 per share or 15x, then it would sell for $231.30. If Goldman sold at 10x its pretax earnings, it would sell for $259.20 per share which mean you can buy Goldman at 6x its pretax earnings and get a 16% pretax return on your potential investment. Goldman has a fair value range of $185 to $231 per share.

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